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We’ve all heard the parable of the frog that is placed in a pot of water and then boils to death as the water is gradually heated. Though the parable has since been debunked, it still serves as a rich metaphor for describing how our finest organizations and executives sometimes get themselves into trouble.1 To extend the metaphor further, many of our most popular business articles and books can be said to have focused, in one way or another, on how to avoid getting boiled to death. Leavitt’s “Marketing Myopia” is a classic in this regard.2 How could buggy whip manufacturers be so shortsighted as to not see that the age of the automobile would wipe out their market? Why did they stubbornly refuse to think more broadly about the market they served? More recently, Clayton Christensen advances the idea that “disruptive technologies” can catch successful companies off guard, causing them to fail.3 Overcommitment to a course of action (even one that has worked in the past and now may be working) is likely to make executives miss certain warning signs or misinterpret them when they do appear. Returning to the frog parable, executives are apt to ignore the fact that the temperature around them is gradually rising. Like real frogs, however, executives can escape from their pot of hot water.

The problem is that, in many cases, executives become so strongly wedded to a particular project, technology, or process that they find themselves continuing when they should pull out. Instead of terminating or redirecting the failing endeavor, managers frequently continue pouring in more resources.4 Management scholars call this escalation of commitment to a failing course of action.5 While escalation of commitment is a general phenomenon, it is particularly common in technologically sophisticated projects with a strong information technology (IT) component. The special nature of these projects—including the high complexity, risk, and uncertainty they involve—makes them particularly susceptible to escalation. Consider the following example.

In 1992, California’s Department of Social Services (DSS) began a project to develop the Statewide Automated Child Support System (SACSS). The development work was contracted out to Lockheed Martin under a $75.5 million contract and was scheduled to take 3 years to complete. But by 1995, the estimated cost of the still unfinished project had grown to $260 million.

8. M. Keil and J. Mann, “The Nature and Extent of Information Technology Project Escalation: Results from a Survey of IS Audit and Control Professionals,” IS Audit & Control Journal, volume 1, 1997, pp. 40–48.

9. De-escalation can be said to have occurred whenever there is reduced commitment to a previously chosen course of action. In the case of project failure, such a reduction in commitment could manifest itself as project abandonment, but it could also be manifested in the form of significant changes made in relation to some previous course of action. Thus, we take a broad view of de-escalation in this paper, defining it so as to include abandonment as well as project redirection.

15. Under normal circumstances, two to three weeks would often elapse between the buying and selling of shares and the actual exchange of money and stock certificates, making the market both riskier and less efficient than desirable. When the 1997 stock market crash occurred, there was a settlements crisis resulting in nearly one million unsettled share transactions. Trades remained unsettled for months.

17. It was projected that Taurus would save the equities industry $225 million over 10 years. The Taurus project has been well documented by H. Drummond, and we draw heavily upon her work in the analysis presented here. See:

H. Drummond, Escalation in Decision-Making: The Tragedy of Taurus New York: Oxford University Press, 1996).

18. Ibid., p. 64.

19. Ibid., p. 74.

20. Vista refused to enter into a fixed-price contract for the modifications.

21. Drummond (1996), p. 60.

22. Drummond (1998), p. 76.

23. H. Drummond, “Are We Any Closer to the End? Escalation and the Case of Taurus,” International Journal of Project Management, volume 17, February 1999, pp. 11–16.

24. Drummond (996), p. 138.

25. Ibid., p. 137.

26. Ibid., p. 141.

27. Ibid., p. 138.

28. Ibid., p. 139.

29. Ibid., pp. 147–148.

30. Ibid., p. 69.

31. Ibid., p. 70.

32. Ibid., p. 114.

33. Ibid., p. 148.

34. Ibid.

35. Ibid., p. 150.

36. Ibid., p. 151.

37. Ibid.

38. Ibid., p. 155.

39. Ibid., p. 152.

40. Ibid., p. 151.

41. Staw and Ross (1987).

42. This finding is consistent with previous literature. See, for example:

46. One means of saving face in the midst of such a crisis is to exercise various impression management techniques. See, for example:

C. L. Iacovou and A.S. Dexter, “Explanations Offered by IS Managers to Rationalize Project Failures” (Vancouver: University of British Columbia, Management Information Systems Division, Working Paper 96-MIS-003, August 1996); and

M.L. Leatherwood and E.J. Conlon, “Diffusibility of Blame:Effects on Persistence in a Project,” Academy of Management Journal, volume 30, December 1987, pp. 836–847.

About the Authors

Mark Keil is an associate professor, Department of Computer Information Systems, Robinson College of Business Administration, Georgia State University.Ramiro Montealegre is an assistant professor in the College of Business and Administration, University of Colorado. Contact the authors at: mkeil@gsu.edu, and Ramiro.Montealegre@ Colorado.edu.

Acknowledgments

We are indebted to the employees of the city of Denver, BAE, other contractors who worked on the Denver International Airport, and the airlines for their willingness to discuss the circumstances surrounding the computerized baggage-handling system. We would also like to thank Helga Drummond for providing such a rich case study of the Taurus system. It is rare to find examples of IT failures that have been documented so thoroughly. Finally, we gratefully acknowledge the support of the Robinson College of Business at Georgia State University and the College of Business at the University of Colorado for providing summer research grants to pursue this project.